Rosneft completed the transaction today, the state-run
producer said in a statement. After using some of the proceeds
from the sale of its half to buy more shares, BP Plc ended up
with $12.5 billion in cash and 19.75 percent of Rosneft. Rosneft
also paid $27.7 billion in cash to AAR, which represents the
group of billionaires holding the other half.

“We welcome BP as the major shareholder of Rosneft, which
will take part in shaping the company’s strategy,” Igor Sechin,
Rosneft’s chief executive officer and a long-time ally of
President Vladimir Putin, said in the statement.

The biggest takeover in Russian history strengthens the
state’s hold over oil and gas production, the source of about
half of government revenue. Moscow-based Rosneft, which was
partly built on the state-enforced bankruptcy of Yukos Oil, will
pump more than 4 million barrels of crude a day, exceeding the
output of Canada or Iraq.

After recycling $4.9 billion of cash from the deal into
Rosneft stock, BP has become the second-largest shareholder
after the Russian state and CEO Bob Dudley will sit on the
board. The U.K. company will be able to include its share of
Rosneft’s reserves and production in its own accounts.

Ahead of Schedule

“The most significant thing is that the deal completed
almost three months before we had expected it to,” said Jason
Gammel, an analyst at Macquarie Capital Europe Ltd. in London.
“That means they may start recording earnings from Rosneft in
the second quarter.”

BP has promised investors that it will offset the dilution
to the company’s earnings per share from the deal. Chief
Financial Officer Brian Gilvary said in October that BP may buy
back at least $4 billion of BP stock.

The London-based producer got 12.8 percent of Rosneft and
bought an additional 5.7 percent for $4.87 billion from state
holding Rosneftegaz in the deal, on top of a 1.25 percent stake
it already owned.

The deal gives BP “a wonderful opportunity to forge a new
partnership with a great Russian oil company,” Dudley, who is
also a member of Rosneft’s steering committee on the integration
of TNK-BP, said in the statement.

Rosneft rose 2.1 percent in Moscow, the most since Feb. 13,
to close at 242.44 rubles.

BP and Rosneft will consider opportunities for joint work
on “standalone projects, both in Russia and internationally,”
according to the statement.

TNK-BP Dividends

TNK-BP, which accounted for about a quarter of BP’s output
and a fifth of its reserves, paid the company $19 billion in
dividends since it was formed in 2003. BP’s initial investment
in the venture was $8 billion.

Today’s deal will see Rosneft, which has a market value of
$83 billion, overtake PetroChina Co., Asia’s largest oil
company, in crude oil production.

Putin met with Dudley and Sechin in his residence outside
Moscow, congratulating the executives on the deal’s completion,
Interfax reported.

The sale of the stake in TNK-BP gives Alfa, Access and
Renova, the shareholders of the AAR group, an opportunity “to
capitalize on major new opportunities in Russia and around the
world,” according to an e-mailed statement.